Vest pleased with result in hectic covered market

Jan 16th, 2014

Sparebanken Vest Boligkreditt sold a Eu500m no-grow five year covered bond on Thursday of last week (9 January), having seen “no reason to wait” to tap the market early in the year given strong market conditions, an official at the issuer told Nordic FIs & Covered.

The Norwegian covered bond company priced the deal at 10bp over mid-swaps, which compares with a re-offer spread of 12bp for a Eu500m five year it sold in early September.

Leads Commerzbank, HSBC, Nordea and UniCredit built an order book of around Eu850m for Sparebanken Vest’s latest issue, after having initially marketed it at 10bp-12bp over.

Egil Mokleiv_300More than 60 accounts took part. Germany took 44%, the Nordics 24%, the Benelux 10%, central and eastern Europe 8%, Austria 5%, Switzerland 3%, Asia 3%, and others 3%. Banks were allocated 54%, central banks and agencies 28%, funds and insurance companies 14%, and corporates 4%.

Sparebanken Vest’s deal was one of three new covered bonds in the market that day which took last week’s supply to Eu8.5bn across nine issues. The other issuers were Commonwealth Bank of Australia, which priced a Eu1bn five year at 18bp over, and Credit Suisse, with a Eu1.25bn seven year at 13bp over.

Egil Mokleiv, managing director, Sparebanken Vest Boligkreditt, said that the new issue had been planned for some time.

“In early September we did a deal and before that we did substantial investor work with very good feedback, so we figured we could capitalise on our market activity in the second half of 2013 by going out relatively early this year,” he said.

A positive start to new issuance in 2014 encouraged the issuer to make its move when it did, according to Mokleiv.

“Investors seemed quite ready to invest so we found no reason to wait and just had to find the right day,” he said. “It seems to have worked out and we are happy with that.

“The spread is quite satisfactory and we are glad to see that it is possible to place a Eu500m no-grow in a hectic market at quite a good margin.”

2014 is the first year that Sparebanken Vest will tap the capital markets for some major refinancing, according to Mokleiv, with the issuer having until now mostly having raised new funding since its creation in 2008. Refinancing in 2014 is only for Norwegian krone transactions, he said, with the issuer’s first public euro transaction, sold in 2010, maturing in June 2015.

Additional funding needs are lower than in the past given slower growth in the Norwegian banking sector, he added.

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